Mixed prescriptions from Dr. Amunugama, Dr. Harsha in Parliament debate on amendments to new taxes

By Ashwin Hemmathagama
Our Lobby Correspondent
With Sri Lanka’s economy reporting 7.4% growth in 2013, the Government is looking at preparing an economic policy framework till 2030 by taking advantage of the political stability displayed in all election victories, according to Minister of International Monetary Co-operation and Deputy Minister of Finance and Planning Dr. Sarath Amunugama.
Amunugama added that riding this growth wave, the Government is aiming at over 8% growth in 2014 and requests society to embrace the change and the dynamic shift toward development, which is inevitable.
Moving the Value Added Tax, Inland Revenue, Nation Building Tax, Economic Service Charge, and the Telecommunication Levy amendments yesterday in Parliament, the Minister praised the Daily FT for the recent ADB report on economic growth in Sri Lanka.
“In the 2 April edition of the Daily FT, the ADB expressed confidence on Sri Lanka and its rapid growth. According to this newspaper report, the improved external environment, higher investment and the recovery in domestic consumption were the key reasons,” the Minister said.
According to Minister Amunugama, the Nation Building Tax reforms will address LP gas distribution, airport services, retail sales at duty free shops, tractor sale, importation of medicines, foreign remittances made on headquarters of international organisations situated in Sri Lanka and domestic coconut oil production.
“We have extended the period of the Economic Service Charge and brought it on par with Inland Revenue Taxes. The Telecommunication Levy has been increased from 20% to 25%. Value Added Tax is exempted on gully bowsers, tractors and other equipment used for garbage removal; taxes on copper cables imported for telecommunication projects have been reduced. Professionals will have a lesser tax burden,” he said.
Complementing the growth, the Minister stated the ADB also reported that in 2013 the agriculture sector had a growth of 4.4% against 9.9% growth in the manufacturing sector.
“The services sector grew by 6.4%. The Government believes today’s proposals will help us to sustain this growth and reach the next level. The fiscal deficit was brought down. We were able to meet the targets set in the Budget. Our tourism sector, which expected one million arrivals, ended up with 1.4 million. Foreign worker remittances have increased to $ 7 billion. Unemployment reduced to 4.6%. It is reported that there are over 15,000 foreigners working in Sri Lanka having arrived on tourist visas. There is a new middle class forming in this country. Our society is transforming. There are so many branded clothes and mobile phones in use. Sri Lanka Cricket is the best branding we have. We aim for 8% growth,” he added.
However, Opposition lawmaker Dr. Harsha de Silva stated that the “animal instinct or the animal spirit known to all engaged in a business” keeps new investments at bay.
“The only area in which the economy grew was the construction sector – building roads, railroads, and the airport. If I am not mistaken, almost 11% of our GNP represents the construction sector, which has increased over 14.4% after inflation. In reality this shows considerable growth. But this growth is not reflected in agriculture and also not visible in the domestic economy,” said Dr. de Silva in his response.
“You have added NBT to pharmaceuticals. This doesn’t give happiness to the public but makes them angry and sad. Take the telecommunication levy. On par with the ‘Mahinda Chinthana’ political manifesto, plans are there to develop Sri Lanka as a knowledge-based hub. But certain infrastructure is required and the tax should be reduced. However, the telecommunication tax is now increased from 20% to 25%. There is another flaw in how the Inland Revenue has defined professionals. It identifies certain professions and has dropped the economists in this list. Is this a deliberate attempt? In general people are aware of the taxes. In this country indirect taxes are 80% and 20% are direct taxes. The accepted standard is that indirect standards should be 40%,” added Dr. de Silva.